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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT -- Ignore unavailable to you. Want to Upgrade?

To: Andmoreagain who wrote (4702)	5/19/1999 12:31:00 AM
From: Maurice Winn	Read Replies (2) \| Respond to of 29987

Andy, if Iridium gives their minutes away, they still only have 1.2bn or so minutes for sale. That's 10% of Globalstar's and 3% of Globalstar/ICO combined. That is irrelevant. Iridium is now a 'once upon a time' situation as far as Globalstar shareholders are concerned. Iridium shareholders are still vitally concerned to minimize their losses, but Globalstar shareholders should forget about Iridium. Look out for ICO and others. That's where the competition which matters is coming from. It's worrying to see comments such as these from Red Herring: Message 9579547 ------------------------------------------------------------------- ...Although the scale of these satellite service companies is unprecedented, their economic strategies are similar to those of any wireless startup: invest huge amounts of capital to secure bandwidth and build infrastructure, deploy a service targeted initially at high-end customers, then expand to a broader audience as increased demand reduces hardware and service costs. All the narrowband satellite companies expect that revenues will come first from global business travelers, and that eventually they will migrate all the way down the consumer food chain to countries with underdeveloped telecommunications infrastructures. It will take Iridium and the other companies years to recoup their infrastructure investments (see chart).... -------------------------------------------------------------- While this back to front thinking continues, Globalstar shareholders are in danger too. For consumer electronics, it makes sense to start at the top of the consumer food chain [a faulty expression, but they used it] and work on down to the mass market. That's because production is initially limited, market development is needed, there is a marginal cost of production and profit can be maximized by selling at a high price initially. Globalstar is totally different. Globalstar has zero marginal cost of production for minutes for a new subscriber [until the constellation is filled with subscribers]. Profits are maximized by satisfying the mass market first and working up the 'food chain'. That means start cheap so huge numbers of minutes are consumed and competitive position and market share are established very quickly, then as capacity is being reached, increase the prices, thus working up the 'food chain' so only those who can justify using the increasingly expensive minutes continue to do so. When the system is full and the wholesale prices are up to a good level [say 50c per minute] then build the next constellation. Prices then would only need to drop by maybe half to build rapid new demand as existing subscribers would gobble the new and cheap minutes. People in telecommunications understand that there is spectacular price elasticity on minute consumption, which means when prices drop enough, demand increases dramatically. With each new constellation launch, the variation in minute price would decrease as the proportion of new minutes to old would continue to decline. By the third constellation, the addition of another 10bn minutes would barely move prices off 50c wholesale [or whatever the market price ends up at, which will depend on ICO and others too]. The critical period is the first year. We don't want to take years to recoup our infrastructure investments. We want big sales NOW! That means cheap minutes, not smart-alecky marketing positional advertising and flim-flam. Sure, use different price plans, such as subsidized handsets for contracted minutes per month and a 2 year contract, or a full price handset and free minutes, or an auction system for the minutes [if Qualcomm would stop messing about and design the handsets and gateways to do it]. The central, key, vital and essential ingredient is CHEAP minutes until the system is busy. That will get FREE advertising in many media from internet to CNBC, newspapers and magazines. It will get word of mouth advertising. It will get SUCCESS written all over Globalstar instead of FAILURE. It will generate a LOT of sales in a short time. It will establish Globalstar in the market in a big way before ICO gets out of their burrow. Hopefully, they will never emerge. Frightened investors will perhaps see to that. This is repetitive, I know, but while people go on saying ridiculous things like the Red Herring article, I'll go on repeating my line. It will be interesting to see how long 'they' take to 'get it'. One day it will be conventional wisdom. But it looks like a long laborious and expensive struggle out of the fixed-price models under which humans have struggled for so long. Maurice